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The technology sector has been grabbing attention this year on continued artificial intelligence (AI) boom and strong corporate earnings. The ultra-popular Select Sector SPDR Technology ETF (XLK - Free Report) has gained 6.8% so far this year.
While there are many ETFs that have outpaced XLK from a year-to-date look, we have highlighted five of these from different industries in the tech space that are leading the way higher. These include VanEck Vectors Semiconductor ETF (SMH - Free Report) , First Trust SkyBridge Crypto Industry & Digital Economy ETF (CRPT - Free Report) , Clockwise Core Equity & Innovation ETF (TIME - Free Report) , Pacer Data and Digital Revolution ETF (TRFK - Free Report) and Invesco AI and Next Gen Software ETF (IGPT - Free Report) .
The technology sector has been a key growth driver of earnings growth over the past two quarters, primarily fueled by "Magnificent Seven" and will remain so in the first quarter of 2024 as well. Hopes of cutting interest rates later this year are also adding to the strength. As the tech sector relies on borrowing for superior growth, it is cheaper to borrow more money for further initiatives when interest rates are low.
Further, the expansion of artificial intelligence (AI) applications holds the promise of ushering in fresh opportunities for growth within the sector. After a stunning rally in Nvidia (NVDA - Free Report) , which made it the third most valuable U.S. company, investors are on the hunt for other companies that are capitalizing on the AI boom. Super Micro Computer (SMCI - Free Report) is another hot trade capitalizing on the ongoing AI craze (read: Super Micro to Join S&P 500, Shares Rally: ETFs to Buy).
As a leading provider of servers and computer infrastructure essential for AI developments, Super Micro has become a key player in supporting the deployment and training of AI models, especially those based on Nvidia technology.
Further, the sector outlook remains solid. The global digital shift has accelerated e-commerce for everything, ranging from remote working to entertainment and shopping, thereby bolstering strength in the sector. The rapid adoption of cloud computing, big data, the Internet of Things, wearables, VR headsets, drones, virtual reality, machine learning, digital communication, blockchain and 5G technology will continue to fuel a rally.
Moreover, the technology sector has a solid Zacks Sector Rank, being in the top 38%, which suggests continued outperformance in the coming months.
Let’s dig into the details of the abovementioned ETFs:
VanEck Vectors Semiconductor ETF offers exposure to the companies involved in semiconductor production and equipment. SMH follows the MVIS US Listed Semiconductor 25 Index, which measures the overall performance of companies involved in semiconductor production and equipment. VanEck Vectors Semiconductor ETF holds 26 stocks in its basket (read: 5 Top-Ranked ETFs at New Highs Set to Soar Further).
VanEck Vectors Semiconductor ETF has managed assets worth $17.3 billion and charges 35 bps in annual fees and expenses. SMH is heavily traded with a volume of 8 million shares per day and has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook.
First Trust SkyBridge Crypto Industry & Digital Economy ETF (CRPT - Free Report) – Up 19.6%
First Trust SkyBridge Crypto Industry and Digital Economy ETF is designed to provide exposure to companies that SkyBridge believes are driving cryptocurrency, crypto assets and digital economy-related innovation. SkyBridge identifies securities primarily via “bottom-up” research focused on finding companies leading in the crypto industry ecosystem.
First Trust SkyBridge Crypto Industry & Digital Economy ETF holds 30 stocks in its basket and charges 85 bps in fees per year from investors. It has amassed $50 million in its asset base and trades in an average daily volume of 76,000 shares (read: Bitcoin on an Unstoppable Rally: 5 Sizzling Hot ETFs).
Clockwise Core Equity & Innovation ETF is a cutting-edge exchange traded fund designed for investors seeking exposure to long-term core growth opportunities, balanced with emerging technologies that are shaping the future. It holds 32 stocks in its basket with each making up for no more than 8% of assets.
Clockwise Core Equity & Innovation ETF has gathered $20.3 billion in its asset base and charges 95 bps in fees per year from investors. It trades in average daily volume of 10,000 shares.
Pacer Data and Digital Revolution ETF (TRFK - Free Report) – Up 17.3%
Pacer Data and Digital Revolution ETF aims to offer investors exposure to the globally listed stocks and depositary receipts of data and digital revolution companies. It follows the Pacer Data Transmission and Communication Revolution Index, holding 80 stocks in its basket.
Pacer Data and Digital Revolution ETF has accumulated $26.7 million in its asset base and in average daily volume of 26,000 shares. It has an expense ratio of 0.60%.
Invesco AI and Next Gen Software ETF (IGPT - Free Report) – Up 15.7%
Invesco AI and Next Gen Software ETF offers exposure to companies with significant exposure to technologies or products that contribute to future software development through direct revenue. It holds 100 stocks in its basket and charges 60 bps in fees per year from investors (read: Reddit's IPO Filing Puts These ETFs in Focus (Revised)).
Invesco AI and Next Gen Software ETF has amassed $253.9 million in its asset base and has a Zacks ETF Rank #1.
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5 Technology ETFs Outperforming XLK This Year
The technology sector has been grabbing attention this year on continued artificial intelligence (AI) boom and strong corporate earnings. The ultra-popular Select Sector SPDR Technology ETF (XLK - Free Report) has gained 6.8% so far this year.
While there are many ETFs that have outpaced XLK from a year-to-date look, we have highlighted five of these from different industries in the tech space that are leading the way higher. These include VanEck Vectors Semiconductor ETF (SMH - Free Report) , First Trust SkyBridge Crypto Industry & Digital Economy ETF (CRPT - Free Report) , Clockwise Core Equity & Innovation ETF (TIME - Free Report) , Pacer Data and Digital Revolution ETF (TRFK - Free Report) and Invesco AI and Next Gen Software ETF (IGPT - Free Report) .
The technology sector has been a key growth driver of earnings growth over the past two quarters, primarily fueled by "Magnificent Seven" and will remain so in the first quarter of 2024 as well. Hopes of cutting interest rates later this year are also adding to the strength. As the tech sector relies on borrowing for superior growth, it is cheaper to borrow more money for further initiatives when interest rates are low.
Further, the expansion of artificial intelligence (AI) applications holds the promise of ushering in fresh opportunities for growth within the sector. After a stunning rally in Nvidia (NVDA - Free Report) , which made it the third most valuable U.S. company, investors are on the hunt for other companies that are capitalizing on the AI boom. Super Micro Computer (SMCI - Free Report) is another hot trade capitalizing on the ongoing AI craze (read: Super Micro to Join S&P 500, Shares Rally: ETFs to Buy).
As a leading provider of servers and computer infrastructure essential for AI developments, Super Micro has become a key player in supporting the deployment and training of AI models, especially those based on Nvidia technology.
Further, the sector outlook remains solid. The global digital shift has accelerated e-commerce for everything, ranging from remote working to entertainment and shopping, thereby bolstering strength in the sector. The rapid adoption of cloud computing, big data, the Internet of Things, wearables, VR headsets, drones, virtual reality, machine learning, digital communication, blockchain and 5G technology will continue to fuel a rally.
Moreover, the technology sector has a solid Zacks Sector Rank, being in the top 38%, which suggests continued outperformance in the coming months.
Let’s dig into the details of the abovementioned ETFs:
VanEck Vectors Semiconductor ETF (SMH - Free Report) – Up 26.2%
VanEck Vectors Semiconductor ETF offers exposure to the companies involved in semiconductor production and equipment. SMH follows the MVIS US Listed Semiconductor 25 Index, which measures the overall performance of companies involved in semiconductor production and equipment. VanEck Vectors Semiconductor ETF holds 26 stocks in its basket (read: 5 Top-Ranked ETFs at New Highs Set to Soar Further).
VanEck Vectors Semiconductor ETF has managed assets worth $17.3 billion and charges 35 bps in annual fees and expenses. SMH is heavily traded with a volume of 8 million shares per day and has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook.
First Trust SkyBridge Crypto Industry & Digital Economy ETF (CRPT - Free Report) – Up 19.6%
First Trust SkyBridge Crypto Industry and Digital Economy ETF is designed to provide exposure to companies that SkyBridge believes are driving cryptocurrency, crypto assets and digital economy-related innovation. SkyBridge identifies securities primarily via “bottom-up” research focused on finding companies leading in the crypto industry ecosystem.
First Trust SkyBridge Crypto Industry & Digital Economy ETF holds 30 stocks in its basket and charges 85 bps in fees per year from investors. It has amassed $50 million in its asset base and trades in an average daily volume of 76,000 shares (read: Bitcoin on an Unstoppable Rally: 5 Sizzling Hot ETFs).
Clockwise Core Equity & Innovation ETF (TIME - Free Report) - Up 18.7%
Clockwise Core Equity & Innovation ETF is a cutting-edge exchange traded fund designed for investors seeking exposure to long-term core growth opportunities, balanced with emerging technologies that are shaping the future. It holds 32 stocks in its basket with each making up for no more than 8% of assets.
Clockwise Core Equity & Innovation ETF has gathered $20.3 billion in its asset base and charges 95 bps in fees per year from investors. It trades in average daily volume of 10,000 shares.
Pacer Data and Digital Revolution ETF (TRFK - Free Report) – Up 17.3%
Pacer Data and Digital Revolution ETF aims to offer investors exposure to the globally listed stocks and depositary receipts of data and digital revolution companies. It follows the Pacer Data Transmission and Communication Revolution Index, holding 80 stocks in its basket.
Pacer Data and Digital Revolution ETF has accumulated $26.7 million in its asset base and in average daily volume of 26,000 shares. It has an expense ratio of 0.60%.
Invesco AI and Next Gen Software ETF (IGPT - Free Report) – Up 15.7%
Invesco AI and Next Gen Software ETF offers exposure to companies with significant exposure to technologies or products that contribute to future software development through direct revenue. It holds 100 stocks in its basket and charges 60 bps in fees per year from investors (read: Reddit's IPO Filing Puts These ETFs in Focus (Revised)).
Invesco AI and Next Gen Software ETF has amassed $253.9 million in its asset base and has a Zacks ETF Rank #1.